Zero based budgeting

This refers to an approach to budgeting in which all activities are re-evaluated each time a budget is formulated.

Zero based budgeting assumes costs are zero, until otherwise justified. Any new cost is compared with the new benefit it generates. This differs from incremental budgeting which assumes a previous baseline of cost and justifies changes from that baseline.

Zero based budgeting is a term normally found in management accounting and performance management.

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